Apple goes back to its old ways for a new reality

Despite its massive market cap, Apple rarely makes large acquisitions. With the $300m purchase of Dialog Semiconductor’s power management assets, the company inks its largest disclosed acquisition since the $3bn pickup of headphone maker Beats back in 2014. Yet today’s deal doesn’t imply the start of a new phase for Apple’s M&A program as much as a return to its old ways.

For $300m, Apple is obtaining a license to Dialog’s power management chip technology, along with 300 employees and four facilities in Europe. (As part of the transaction, it’s spending another $300m to preorder certain other products from Dialog.) Prior to buying Beats, some of Apple’s largest purchases were for suppliers, according to 451 Research’s M&A KnowledgeBase. For example, it paid $356m for biometric sensor provider AuthenTec in 2012 and $278m for microprocessor designer P.A. Semi in early 2008.

Reaching for hardware suppliers isn’t the only way Apple’s dealmaking activity is regressing. According to the M&A KnowledgeBase, it wasn’t until 2013 that the Cupertino-based computing company printed more than six transactions in a single year, although in all but one full year since then it’s done at least 10 acquisitions (in 2016, it printed eight). This year, it’s made just five.

Still, the return to the old strategy reflects a new reality for Apple – smartphones are a fully mature market, so it’s logical for Apple to turn to acquisitions that stabilize its supply chain and expand its gross margins. The most recent smartphone survey from 451 Research’s VoCUL shows that just 9.9% of respondents plan to buy a smartphone in the next 90 days, nearing the lowest second-quarter reading on record and part of a continuing downward slope in smartphone demand.